Session 4 Flashcards
What are the two (3?) models related to competitive strategy decisions?
- Industrial organization model (internal)
- Resource-based model (external)
+ institution-based model sometimes
What is the βformulaβ for I/o and resource based model?
π = π·πβπΏπ + π·πβπΏπ + π·πβπΏπ + π·πβπΏπ + πΈπΆππππ π½πππ
x1: nb competitors
x2: scope of network
x3: whatever you get the point
What is an industry?
Group of firms producing products that are close substitutes for each other
What are Michael Porterβs five forces?
- Bargaining power of suppliers
- Bargaining power of buyers
- Threat of new entrants
- Rivalry among firms
- Threat of substitutes
What is rivalry among firms
Firm is challenged by a competitors actions or recognizes an opportunity to improve market position
Intensity depends on:
- Number of competitors
- industry growth
- fixed costs
- lack of differentiation
Rivalry is based on:
- Price
- After sale service
- Innovation
What is bargaining power of buyers?
Buyers ability to exert control over price
Buyers are powerful when:
- Few large buyers dominate industry
- Available substitutes
- Buyer is informed
- Products are standardized
- High volume customer
- Sensitive to price
- Low switching costs
- Supplier brand identity is important
What is bargaining power of suppliers?
Suppliers ability to exert control over price
Suppliers powerful when:
- Few large suppliers dominate
- Few substitutes
- Products are important to buyers (e.g. drugs)
- High switching cost
- Buyer is not significant customer
What are the barriers to entry? (threat of new entrants)
- Economies of scale
- Product differentiation
- Capital requirements
- Access to distribution channels
- Cost disadvantages (locations, processes, government subsidies)
- Government policy (government permission/licensing)
What is threat of substitutes?
Products/Services from outside a given industry that perform a similar or same function as the product which the industry produces
Threat when:
- Low switching cost
- substitute price is low
- Same or better performance
Reduce substitution risk:
- Differentiate through quality, after sale service, location
What are the three forces that have been added to Porterβs competitive forces?
- Complementary organizations: Businesses that provide G/S that complement your activities
- Social forces: legal, regulatory, social trends that are affecting business
- New strategies: New approaches to creating and selling G/S that your traditional competitors and emerging competitors are introducing
What are resources?
Tangible and intangible assets a firm uses to implement its strategies.
(assets, people, brand name, etc)
- dont yield a competitive advantage alone
What are capabilities?
Resources firms use to organize and exploit other resources
- created by combining tangible/intangible resources.
- Used to complete tasks
- ## Foundation for building core competencies/competitive advantages
Why is internal analysis important?
Cant evaluate the attractiveness of an industry without analyzing the resources a firm brings to that industry
What are the assumptions of resource-based theory?
Firms have:
- different resources
- unique capabilities depending on how they use resources
- resources/capabilities are not very mobile among firms
- resources/capabilites are the bases of competitive advantage and performance
What are the four categories of tangible resources?
Financial: ability to borrow and generate funds
Organizational: reporting structures
Physical: PPE, distribution, inventory
Technological: avaiable technology, copyrights, patents, trademarks (ACCOUNTING DISAGREES WITH THIS BS)
What are the three categories of intangile resources?
Human resources: knowledge, trust, skills, collaboration
Innovation: ideas, scientific capabilities, innovation capacity
Reputational resources: brand name, perception of quality, reputation with suppliers and customers
What is the difference of tangible and intangible resources in terms of being able to leverage them?
Tangible: hard to leverage, difficult to derive additional business or value from tangible resources
Intangible: Can be leveraged. Less visible, harder for competitors to understand, purchase, substitute, etc. More relied on for the foundation of a firmβs capabilities
What are core competencies?
Capabilities that serve as a source of competitive advantage for a firm over its rivals.
- Emerge through time by accumulating and learning how to deploy resources and capabilities.
- How the firms adds unique value
What is the value chain?
Shows how a product moves from raw material stage to final customer
Template that a firm uses to analyze costs and identify means that can be used to facilitate implementation of a strategy.
What are value chain activities?
activities the firm completes in order to support the work being done to produce, sell, distribute and service the products the firm is producing.
Can develop a capability/competency in any of the value chain activities
What is necessary in order for a value chain activity to be a competitive advantage?
The resource or capability must allow the firm to perform an activity in a better way than its competition or create value that the competitors cannot complete
What is outsourcing?
When firm cannot create value in a value chain activity or support activity, they use outsourcing.
It is the purchase of a value-creating activity or a support activity from an exeternal supplier
When should firms outsource and how does it create value?
Outsource when: they cannot create value or are at a substantial disadvantage compared to competitors.
Creates value by: increasing flexibility, mitigating risks, reduce CAPEX
What is the strategic rational of outsourcing?
- Helps business ofucs on broader business issues (Access world class abilities and higher efficiency)
- Free resources for other purposes
- Accelerate re-engineering benefits (use others who have already re-engineered to take over processes)
- Share risk (reduce CAPEX, more flexible, easier to adapt)
SWOT?
If you dont already know this, you should drop out of desautels
External: Opportunities/threats
Internal: Strength/weakness
What is industry analysis?
β Understanding key competitive forces that shape competition
in an industry
β Identify key success factors
β Predict future industrial profitability
β Find strategy
